Caught napping, Rose faces tough questions

Under Sir Stuart Rose, M&S has reclaimed its position as the high-street bellwether, sitting across fashion, furniture and food. So today's news looks especially grim.

Some of it is M&S's own fault. The chain has made a virtue of its focus on high quality food - and accordingly invited the customer to pay extra. On a price check this week, Tesco was charging £1.38 for a kilo of baking potatoes, Waitrose £1.49 and M&S £1.79.

In an economic downturn, with shoppers being clobbered by higher fuel and energy bills and unable and unwilling to run up credit as they once did, that sort of pricing is unsustainable.

The speed of the squeeze has caught M&S napping. While other food retailers have been slashing prices, M&S has been slow to respond. There have also been problems with availability of some items. For too many customers M&S has suddenly ceased to be a weekly food shopping destination, and that is unacceptable, which is why food director Steven Esom has lost his job.

But serving up the head of Esom - until recently regarded as a shining star - is unlikely to save Sir Stuart from some tough questioning. Surely, the chief executive officer must have seen the danger in being exposed at the very top of the price range?

Investors are entitled to ask just how long Sir Stuart, already under pressure over his elevation to executive chairman, can remain.

Despite careful choreographing and undoubted support from small shareholders who all but idolise him, next week's M&S annual general meeting has become very awkward indeed for Sir Stuart.

A dip in food sales carries another grave risk for M&S. It has long relied on the footfall from food to prop up its clothes, something pure fashion retailers cannot do. Fewer people buying food is bound to mean fewer people browsing the clothing racks.

Gloom at M&S, once regarded as the great business turnaround story, is bound to impact on the rest of the sector and the City.

When fund manager Nicola Horlick is on Radio 4, as she was this morning, saying that investors should desert UK equities, things are very bad indeed.

It's not just shares: bonds are also wilting, which is why Ms Horlick was suggesting people should move into cash or alternative sources of investment, such as rights to music and foreign agricultural land.

This week there has been a major warning from Trinity Mirror in newspaper publishing.

At the same time, Taylor Wimpey shares have collapsed as housebuilders face their worst conditions for decades. There is bound to be more to come.